Asst. CIT, Circle-8, Pune V. M/s. Autoline Industrial Park Ltd., Pune

ITA 2042/PUN/2012

• Counselvise Citation: 204224514 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 22-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Business expenditure; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 2042 / P N/ 20 1 2 ASSESSMENT YEAR : 200 9 - 10 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 8 , PUNE VS. M/S. AUTOLINE INDUSTRIAL PARK LTD., S.NO. 313, 314, 320 - 23, NANAKARWADI, CHAKAN, TAL. - KHED, PUNE (APPELLANT) (RESPONDENT) PAN NO. AAGCA5630B APPELLANT BY: SHRI S.P. WALIMBE RESPONDENT BY: SHRI SHARAD SHAH DATE OF HEARI NG : 12 - 0 5 - 2014 DATE OF PRONOUNCEMENT : 26 - 05 - 2014 ORDER PER R.S . PADVEKAR , JM : - THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED O RDER OF THE LD. CIT(A) - V , PUNE DATED 11 - 07 - 2012 FOR THE A.Y. 200 9 - 10. THE REVENUE HAS TAKEN THE FOLLOW ING GROUND IN THE APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT ADMINISTRATIVE AND OTHER EXPENSES OF RS.32,84,221/ - WAS BUSINESS LOSS WHEN IN FACT NO BUSINESS ACTIVITY HAS BEEN UNDERTAKEN BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION? 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE COMPANY IS INCORPORATED FOR THE PURPOSE OF DEVELOPING AND PROMOTING INDUSTRIAL PARKS. THE ASSESSEE FILED THE RETURN OF INCOME F OR THE A.Y. 2009 - 10 DECLARING TOTAL INCOME OF RS.83,03,960/ - . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN 2 ITA NO. 2042/PN/2012, M/S. AUTOLINE INDUSTRIAL PARK LTD., PUNE COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT. IT WAS NOTICED BY THE ASSESSING OFFICER THAT AS PER OBJECTS OF THE ASSESSEE C OMPANY IT SHOULD ACQUIRE 100 ACRES OF LAND FOR CREATING AND DEVELOPING INDUSTRIAL PARKS. THE ASSESSING OFFICER HAS OBSERVED THAT ON VERIFICATION OF PROFIT AND LOSS ACCOUNT, THE ASSESSEE COMPANY PARKED ITS AVAILABLE FUNDS FOR INVESTMENT IN MUTUAL FUNDS AS WELL AS ADVANCED ALSO TO OTHER CONCERNS . 3. THE ASSESSEE HAS DECLARED THE INTEREST INCOME OF RS.1,32,69,035/ - AND DIVIDEND INCOME OF RS.45,90,669/ - . APART FROM THAT NO OTHER INCOME IS DECLARED BY THE ASSESSEE . IT WAS NOTICED BY THE ASSESSING OFFICER THA T THE ASSESSEE COMPANY CLAIMED THE ADMINISTRATIVE EXPENSES TO THE EXTENT OF RS.52,29,495/ - AND FINANCIAL CHARGES OF RS.47,489/ - AS ITS BUSINESS EXPENSES AND AFTER MAKING ADJUSTMENT OF SHARE ISSUE EXPENSES AND PRE - OPERATIVE EXPENSES HAVE DECLARED THE BUSINE SS LOSS OF RS.48,91,820/ - . THE SAID BUSINESS LOSS HAS BEEN SET OFF AGAINST THE INCOME FROM OTHER SOURCES. AS NOTED BY THE ASSESSING OFFICER THE ADMINISTRATIVE EXPENSES COMPRISE OF THE SHARE ISSUE EXPENSES OF RS.4,24,763/ - AND FOREIGN EXCHANGE FLUCTUATION LOSS RELATING TO SHARE CAPITAL OF RS.15,68,000/ - . THE ASSESSING OFFICER ASKED THE EXPLANATION OF THE ASSESSEE WHY THE LOSS CLAIMED SHOULD NOT BE DISALLOWED AND WHY THE EXPENSES CLAIMED SHOULD NOT BE TREATED AS A CAPITAL EXPENDITURE. THE ASSESSEE FILED T HE REPLY WHICH IS REPRODUCED IN THE ASSESSMENT ORDER. THE ASSESSEE CLAIMED THAT THE ASSESSEE COMPANY HAS STARTED AND SET UP ITS BUSINESS AND RECEIVED CERTIFICATE OF COMMENCEMENT OF BUSINESS FROM THE REGISTRAR OF THE COMPANY DATED 12 - 10 - 2010 AND THE ASSESS EE COMPANY HAS STARTED ITS ACTIVITY OF BUSINESS BY PURCHASING OF LAND FOR DEVELOPMENT OF INDUSTRIAL PARK AT CHAKAN. 4. THE ASSESSING OFFICER RAISED THE QUERIES ON THE CLAIM OF THE ASSESSEE. THE ASSESSEE FILED THE WRITTEN SUBMISSION ON 17 - 11 - 2011 WHICH IS REPRODUCED IN THE ASSESSMENT ORDER. AFTER CONSIDERING THE REPLY 3 ITA NO. 2042/PN/2012, M/S. AUTOLINE INDUSTRIAL PARK LTD., PUNE OF THE ASSESSEE , THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE COMPANY HAS YET TO ACQUIRE 40 ACRES OF LAND AS THE MINIMUM REQUIREMENT FOR ESTABLISHING INDUSTRIAL PAR K IS 100 ACRES O F LAND. THE ASSESSING OFFICER HAS OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY WAS SIMPLY ENGAGED IN OBTAINING LAND FOR THE PURPOSE OF ESTABLISHING INDUSTRIAL PAR K AND NO OTHER ACTIVITY TOWARDS THE CONSTRUCTION OF THE INDUSTRIAL PARK WAS UNDERTAKEN. THE ASSESSING OFFICER, THEREFORE, REJECTED THE CLAIM OF THE ASSESSEE THAT THE ADMINISTRATIVE EXPENDITURE TO THE EXTENT OF RS.52,76,984/ - IS A REVENUE EXPENDITURE AND HELD THAT THE SAME IS TO BE CAPITALIZED. THE ASSESSING OFFICER ALS O REJECTED THE ASSESSEE S C LAIM IN RESPECT OF BUSINESS LOSS. THE ASSESSEE CHALLENGED THE FINDING OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A) AND LD. CIT(A) WITH HIS CRYPTIC REASONING ALLOWED THE CLAIM OF THE ASSESSEE. THE REASONS GIVEN BY THE LD. CIT( A) IN ONE PARAGRAPH ARE AS UNDER : 6. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AS WELL AS REPLY OF THE APPELLANT. IT IS SEEN THAT AS PER COMMENCEMENT CERTIFICATE DATED 12.10.2007, THE APPELLANT COMPANY WAS ENTITLED TO COMMENCE ITS BUSINESS WHICH IT DID BY WAY OF ACQUIRING 40 ACRES OF AGRICULTURAL LAND DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR. THE CRUCIAL FACT IN DECIDING THE ISSUE IN THIS CASE IS, WHAT IS THE NATURE OF ACQUIRED LAND IN THE BOOKS OF ACCOUNT. IF IT IS TREATED AS STOCK I N TRADE/W.I.P THEN IT CANNOT BE SAID THAT BUSINESS HAS NOT COMMENCED AS THE APPELLANT HAS TAKEN IT'S FIRST STEP BY ACQUIRING 40 ACRES OF LAND DURING THE YEAR. IT MUST BE APPRECIATED THAT ACQUISITION OF LAND IS A TIME CONSUMING PROCESS IN WHICH NEGOTIATIONS ARE TO BE CARRIED OUT WITH VARIOUS LAND HOLDERS/BROKERS ETC. THEREFORE, IT WILL BE TOO MUCH TO EXPECT THAT THE APPELLANT COMPANY WILL ACQUIRE 100 ACRES OF LAND DURING PARTICULAR PERIOD. THE OBJECTIONS RAISED BY THE ASSESSING OFFICER ARE PROCEDURAL FORMALI TIES WHICH TAKES PLACE WITH PASSAGE OF TIME BUT ONCE THE APPELLANT TAKES FIRST STEP TOWARDS ACQUIRING L AND FOR THE PURPOSE OF SETTING UP INDUSTRIAL PARK IT CANNOT BE SAID THAT BUSINESS HAS NOT 4 ITA NO. 2042/PN/2012, M/S. AUTOLINE INDUSTRIAL PARK LTD., PUNE COMMENCED. THEREFORE, IT IS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT BUSINESS HAS NOT COMMENCED IN THIS CASE. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE FACTS ARE NOT IN DISPUTE IN THIS CASE. THE QUERY WAS RAISE D TO THE LD. COUNSEL WHETHER THE ASSESSEE AT LEAST SUBSEQUENTLY ACQUIRED THE BALANCE REQUIRED LAND AND STARTED THE I.T. PARK. THE LD. COUNSEL WAS FAIR TO SUBMIT THAT THE I.T. PARK COULD NOT BE MATERIALIZED AND THEREAFTER THE LAND WAS DEVELOPED AND SOLD. HE ALTERNATIVELY PLEADED THAT IF THE ASSESSING OFFICERS STAND IS ACCEPTED BY THE HON'BLE TRIBUNAL THEN THE SUITABLE DIRECTIONS MAY BE GIVEN FOR ALLOWING THE SAID EXPENDITURE AS A PART OF THE COST OF THE LAND WHEN IN SUBSEQUENT YEAR, THE LAND WAS SOLD. AF TER GIVING OUR ANXIOUS CONSIDERATION TO THE FACTS ON RECORD AS WELL AS THE SUBMISSIONS MADE BEFORE US , WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY TREATED THE SAID EXPENDITURE AS A CAPITAL IN NATURE AND DECLINE D TO ACCEPT THE SAME AS REVEN UE EXPENDITURE. THE FACT REMAINED UNDISPUTED THAT THE I.T. PARK WAS NEVER MATERIALIZED AND EVEN IN THE A.Y. 2009 - 10 THE MINIMUM REQUIRED LAND OF 100 ACRES WAS NEVER ACQUIRED AS PER THE STATE GOVT. NORMS. WE, THEREFORE, REVERSE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE ORDER OF THE ASSESSING OFFICER. AT THE SAME TIME WE ALLOW THE ALTERNATE CONTENTION OF THE ASSESSEE THAT AS THE ASSESSING OFFICER HAS HELD IT AS A CAPITAL EXPENDITURE THEN THE SAME MAY BE TREATED AS A COST OF THE LAND AND THE BENEFIT SHOULD BE GIVEN TO THE ASSESSEE WHEN IN SUBSEQUENT YEAR THE ASSESSEE SOLD THE LAND. IN FACT THIS EXERCISE REVENUE IS NEUTRAL AS THE ASSESSEE G ETS BENEFIT IN SUBSEQUENT YEAR IF HE HAS SELLS OR SOLD THE LAND. 5 ITA NO. 2042/PN/2012, M/S. AUTOLINE INDUSTRIAL PARK LTD., PUNE 6. IN THE RESULT, THE REVENUES APPE AL IS ALLOWED FOR THE STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 26 - 05 - 2014 PRONOUNCED IN THE OPEN COURT ON - 05 - 2014 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 26 TH MAY, 20 1 4 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - V , PUNE 4 THE CIT - V , PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPE LLATE TRIBUNAL PUNE